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Sunday, September 19, 2021

Zomato share price nearly doubles from the IPO, touches fresh record high

On Tuesday, the shares of Zomato rose around 5 per cent to scale a fresh all-time high of Rs 147.80 apiece during the morning trade on both the BSE and National Stock Exchange (NSE). However, after hitting the record high, the stock lost its momentum, giving up all its gains and slipping in the red during the early afternoon trade.

By: Express Web Desk | New Delhi |
Updated: July 27, 2021 2:14:35 pm
zomato ipo, zomato ipo update, zomato ipo subscription statusA delivery worker of Zomato, an Indian food-delivery startup, wearing a face mask waits to collect order outside an eatery in Kolkata, India, July 13, 2021. (REUTERS)

Zomato share price: Restaurant discovery and food delivery platform Zomato made a strong debut in the stock exchanges last Friday, listing at a premium of over 50 per cent from its issue price. The scrip has been on a bull run ever since its market debut and has been scaling new lifetime highs over the past three trading sessions and nearly doubling from its IPO price of Rs 76 per share.

On Tuesday, the shares of Zomato rose around 5 per cent to scale a fresh all-time high of Rs 147.80 apiece during the morning trade on both the BSE and National Stock Exchange (NSE). However, after hitting the record high, the stock lost its momentum, giving up all its gains and slipping in the red during the early afternoon trade.

The brokerage arm of Swiss multinational UBS Group in its Global Research report on Tuesday said that it initiated coverage with a ‘Buy’ rating on the stock. UBS has set a 12-month target price of Rs 165 per share on Zomato.

The food delivery industry has mainly got only two dominant players – Zomato and Swiggy.

“As one of the two leading players in the rapidly growing food delivery market in India, we expect Zomato to deliver >40 per cent revenue CAGR making it one of the fastest growing internet companies in the region,” the UBS report said.

The research report further noted that not only did online food delivery get a boost globally in 2020, other factors such as smaller family sizes, lesser time and willingness to cook and increasing affluence also provide favorable long-term growth tailwind for online food market in India.

“Unit economics are still evolving and competition from restaurants’ self-built platforms/non-delivery platforms such as Thrive, Dotpe will increase; a fragmented eco-system will utimately allow aggregator-platforms to capture a lion’s share of traffic,” UBS report said.

While valuations are not cheap at FY24e EV sales of 17x, but EVSG of 37x and superior growth leaves room for upside, it added.

India has a total of 10 million active users and 50-70 million total online orderers (vs 500-550 million in China and 100-125 million in the US), UBS believes India has a long runway for growth.

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